Contributing to a Circular Economy : CEO Shintaro Yamada and AI Director Shunya Kimura Discuss the Challenges that Mercari’s AI Technology Needs to Overcome

In AI Listings, Image Search… CEO Shintaro Yamada and Director Shunya Kimura Look Back at Mercari’s AI Journey, the two discussed the background and challenges that prompted Mercari to actively pursue the use of AI, which led to the release, starting in 2017, of a variety of features powered by AI technology, including AI listings, personalized timelines, and image search. In this article, the two discuss AI ethics and a concrete path forward to achieving Mercari's vision of a recycling-oriented society.

How Mercari arrived at "recycling-oriented society” as its watchword

Shunya Kimura: When did Mercari start using "recycling-oriented society" as a watchword?

Shintaro Yamada: Probably starting around September 2019. Previously, we had a sense of the issue as an organization, but we started our internal discussion on ESG in earnest around January 2019. I felt that a recycling-oriented society was an issue that Mercari should confront head-on. First, we identified the materiality of Mercari to identify the issues that needed to be addressed, and then we published our first sustainability report.

Mercari currently has more than 20 million customers per month. In the future, we hope that our service will be used by 30 million people, 40 million people, and so on. To get there, I believe we should move beyond just "convenient to have" to become an indispensable part of society. In order to achieve this goal, we’ve had discussions with experts since last year to define our platform philosophy and the basic principles of our marketplace. I can now see a path forward for Mercari to fulfill its responsibility to contribute to a recycling-oriented society, which will also lead to our business growth.

Over the last few years, interest in the natural environment has grown rapidly, partly due to the influence of the coronavirus pandemic. Global warming and massive generation of waste are also major problems. Our current wasteful use of resources is a problem that should be dealt with by society as a whole. I want to see a world where goods are recycled and used for as long as they are usable. We’re always thinking about how Mercari can become an indispensable part of such a recycling-oriented society. Thinking about how Mercari's services can deliver value to society today, I think “contributing to a recycling-oriented society” is a particularly important slogan.

What friction needs to be eliminated to close the 145 trillion yen gap?

Kimura: In terms of accelerating the reuse of goods, I think that Mercari is contributing to some extent. What do you think?

Yamada: We're still a long way off. Total gross sales in Japan, including non-reusable goods such as food, are valued at about 146 trillion yen per year in retail alone. The total transaction value of Mercari is 1 trillion yen, so we have not even reached 1%. As this difference shows, I believe there are still a lot of goods that are discarded or stashed without being listed on the second-hand market.

Yamada: For example, if everything you have at home has been converted into data and you can complete your listing in an instant, it will be even easier to sell on Mercari. Right now, you still need to think a lot and put in a lot of effort to make a listing. There are still complicated aspects such as shipping methods. If we can remove that friction from the current situation, we’ll get more listings. Merpay makes the exchange of money even more seamless. I think we can make it a service that further circulates goods, where people think, "I'm going to buy this, so I might as well try listing it.”

Right now, we have to actively buy and sell, but I think this is where AI can be very powerful. It can make suggestions like, “Since you’re buying this, why not put this up for sale?” If we can promote the effective use of resources through Mercari, we can accelerate progress towards a more recycling-oriented society.

The second-hand market alone is not the answer: partnering with retailers of new merchandise

Kimura: It’s quite interesting how AI can contribute to a recycling-oriented society. Mercari customers search for goods they want, but they don't actively look for goods they might potentially need, so Mercari uses AI to suggest such goods to them. Similarly, by showing the demand for goods the customer already has, you can create opportunities for listings. Mercari is CtoC but is expanding its domain to include BtoC with the launch of its online store service, Mercari Shops. It is now becoming a huge marketplace, more than just a flea market app between individuals. The cycling of goods will break down unless both the selling side and the buying side accelerate together. Matching up the numbers is also important in our business strategy. In order to contribute to a recycling-oriented society, we also need the cooperation of retailers of new merchandise.

Yamada: I agree. To meet this challenge going forward, I believe it’s not enough to simply develop the second-hand market. We’re also working on an approach that communicates data on what’s tenable in the second-hand market to retailers of new merchandise. I believe that circulating data as well as goods can gradually move us closer to a world where manufacturers produce the products they need in the quantities they need and customers get as much use out of them as possible.

Currently, we’re gradually starting to establish data links with manufacturers. We’re not quite there yet, but we’re starting to see some areas where we can get some value. If you restrict yourself to the second-hand market only, the task of converting all the goods around you into data becomes much more difficult. Instead of trying to do everything in our own domain, we at Mercari need to connect more with retailers of new merchandise, including catalog (SKU) linking, while keeping data privacy in mind.

What are the AI ethics? Ethical issues at Mercari

Kimura: We already discussed the importance of AI as a technology for the future development of Mercari. However, I believe it’s equally important to discuss the topic of how to handle AI in an ethical manner. For example, with regard to the recommendation function, you shouldn't handle data in a way that violates customers’ privacy or make recommendations they find objectionable. Recommend what they need, but don't force unwanted information on them.

Yamada: Yes, it's important not to force unwanted information on them. Another thing I would like to be even more conscious of in the future is whether what we are doing will benefit humanity. Even for goods the customer needs, Mercari should have higher ethical standards because Mercari also handles the money part with Merpay. That’s why, for example, you shouldn’t be in a situation where you have to go into debt to purchase a product beyond your ability to repay. Mercari is a platform for buying and selling, so you might think that ethical issues would be less likely to arise than in advertising or social media. However, we want to avoid creating a system that makes people buy more and more for the sake of business growth. In that sense, AI development in Mercari is a place that offers an interesting experience. You’re likely to encounter ethical challenges that no one has ever thought of in the past.

Kimura: Recently, when we were having an internal discussion about the ethics of AI, we talked about the possibility of sensitive issues that could cause discomfort and mistrust among customers when we predict products they may want to buy next. For example, they may have hobbies they don't want others to know about, or they may feel the recommendations interfere with their privacy.

Yamada: Yes, you need a balance between serendipity and recommendations, otherwise it can feel unpleasant. Because your activities on Mercari are not the only thing you do, it’s possible that you go camping on a daily basis, but don’t buy or sell camping goods on Mercari. We’re required to have a sense of ethics as to what kinds of products we recommend to which customers. That's the challenge we face going forward.

Data can reveal the intrinsic value: What's interesting about Mercari's AI and the path forward

Kimura: In order to achieve a recycling-oriented society, we’re working toward the goal of using AI to estimate supply and demand and deliver what is needed, in the amount needed. But to be honest, we still have a ways to go. We need to accelerate our AI modeling and personalization experiments, which we will continue to work on going forward.

Yamada: There's a lot to do, and there's a lot to try. We don't have as many AI/ML engineers as Big Tech. On the other hand, the data handled by Mercari includes a lot of information that is close to the customer, such as customer-generated product images, captions, and prices. Since there are few companies and services that have this kind of data, I believe there is potential for innovation.

Kimura: The type and nature of data is different from regular e-commerce. Understanding the intrinsic value of things is a very interesting part of the AI at Mercari.

Yamada: And it also includes data from Merpay and Mercari Shops. Now that the data infrastructure has been established, we can say that the timing is right for a variety of interesting challenges. We need to think creatively about what we can do with the Mercari data and Mercari services.

At the same time, we’re an organization that takes a medium- to long-term view and can tolerate failure. For example, we can work over long spans of time to regenerate the data and build a data infrastructure. And in terms of human resources, we’ve hired many new graduates from around the world, including the Indian Institute of Technology (IIT). I think this kind of environment is a natural climate for nurturing ML engineers. What these things have in common is they don’t produce immediate results. It's about thinking in the medium to long term. That's why I want to hunker down and get to work on all of these issues, including AI ethics.

Mercari's use of AI began in 2017. In addition to improving the UI/UX, AI has contributed to the development of features that make Mercari safer and more secure.
Related article: AI Listings, Image Search… CEO Shintaro Yamada and Director Shunya Kimura Look Back at Mercari's AI Journey

In the future, we will continue to seek new innovations with the aim of contributing to a recycling-oriented society through AI. Mercari's AI team will continue to take on new challenges.

Photo : Shun Nakayama (Web/Twitter)
Text : Ayumi Iga (Twitter)